Foreign Direct Investment in Nigeria Drops by 33% Due to Dollar Shortage and Crypto Companies’ Hesitation
The National Bureau of Statistics (NBS) has reported that Nigeria, the largest economy in Africa, experienced a 33% decrease in foreign direct investment (FDI) in 2022 due to a severe shortage of dollars. This shortage has also discouraged crypto companies from expanding into the country. In 2022, FDI declined to $468 million from the previous year’s $698 million, marking a significant decrease of approximately 90% since its peak of $4.7 billion in 2008.
The adoption of cryptocurrencies in Nigeria has been growing exponentially. The country has a significant number of active adult crypto traders, with many citizens preferring to store their money in digital currencies instead of fiat cash due to the constant devaluation of the national currency, the naira. In Chainalysis’ 2020 Cryptocurrency Geography Report, Nigeria ranked eighth in crypto adoption and usage rate among 154 countries included in the study. This high adoption rate was expected to encourage more foreign crypto investment in the nation, but the reverse seems to be the case.
In an interview with Cointelegraph, local data analyst and crypto enthusiast, Obinna Uzoije, attributed the low rate of foreign investment in Nigeria to the fact that cryptocurrency has not yet gone mainstream in the country. Uzoije explained that the lack of use of crypto in day-to-day economic activities and the ban on financial institutions from servicing crypto exchanges were to be blamed for the low investment rate. As part of the 2021 ban, the Central Bank of Nigeria directed all commercial banks to close accounts belonging to crypto exchanges and other businesses transacting in cryptocurrencies in the country.
In a tweet, Olumide Adesina, a certified investment trader, reacted to the NBS report by stating that despite Nigerians’ “love” for crypto, fintech, and entertainment, no state has taken the initiative to attract foreign investors in those areas. Adesina further commented that building a real tech and crypto community like Silicon Valley in Lagos State would create thousands of direct jobs.
Lagos State Governor, Babajide Sanwo-Olu, had earlier announced proposals for crypto adoption in the state, according to local media reports. Some of the initiatives proposed by Sanwo-Olu include establishing a dedicated sandbox regulatory framework for cryptocurrency, creating a crypto-focused innovation hub, and providing incentives for businesses that accept crypto payments.
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